Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III futures downside momentum continued yesterday. The Q3 2014 pack averaged $21.18/cwt., down 12¢ on the day. The bull market now seems to be turning over, or at least resting. With this being a shortened holiday week, it will be increasingly more difficult to get a clear picture on the market as we move on. It may be a case of take what you can get this week, and look to do some more analysis when traders come back to the market after the holiday.
Spot Cheese threw a couple of surprises at the market yesterday, leaving us with an inverted spot market again. With GDT out tomorrow and Dairy Products out on Thursday, (with a shortened trading day) we will be looking to those reports for more direction. Any meaningful uptick in production could ultimately bring this side of the market place down in a hurry.
What do we say about butter, except for “when does this train stop?” An active spot session that gained another 11 cents yesterday, putting spot prices at $2.50/lb. That is the highest level seen since 1998, when we traded butter at $2.81/lb., and then quickly saw prices collapse into the mid $1.40s. Continued tightness and lack of product in storage will continue to be fundamentally supportive as we move through the summer months. The cry for exports doesn’t seem to be waning either, as domestic processors continue to manufacture. .
June 30 spot session results:
Block cheese: $2.0000 (down 2.0¢)
Barrel cheese: $2.0500 (unchanged)
Grade A NFDM: $1.8075 (down 2.5¢)
Butter: $2.5000 (up 11.0¢)
• Class III, Cheese & Dry Whey to open firm
• NFDM to open steady
• Class IV to open mixed
• Butter to open higher
USDA put out the most bearish grain report that we have had in years. Outside of some natural disaster, we are going to have some of the lowest grain prices we have had in years. There is some time to go before harvest, but from yesterday’s reaction and expected follow-through today, we could see corn prices at levels not seen since 2010.
The big takeaway from the report for soybeans was that they found an additional 2 million acres planted, sending a shudder through the marketplace. We will have to wait to see where we end up with this market, because there is no real support until we hit $11.25/bushel on the November contract.
• Grains to open soft following yesterday's price collapse
FC Stone's annual two-day Dairy Outlook Conference begins today in Chicago. Visit www.intlfcstone.com/events for information.
The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.